Supply/demand fundamentals mean zip when JPMorgan et al are sitting on their prices

It was another Far East trading session where the high-frequency traders had their way with the gold price, and tripped the CME’s trading circuit breakers around 2 p.m. Hong Kong time as they ran the bid stack once again.  Then there was another spike down shortly after 9 a.m. GMT in London, with the last one occurring either at, or minutes after, the Comex open.

The subsequent rally lasted for the rest of the trading day, both in the Comex market and the electronic market that followed.  But there were sellers of last resort at the ready to makes sure that even these tiny rallies didn’t get out of hand.

The low and high ticks were recorded by the CME as $1,225.70 and $1,254.00 in the December contract; of which there are only three business days left.

Gold closed at $1,251.60 spot, up $7.90 from Friday’s close.  Gross volume was huge, but net volume was only 126,000 contracts.

Silver was under price pressure right from the 6 p.m. Sunday night open in New York, with the low tick coming shortly after 3 p.m. Hong Kong time, and less than an hour before the London open.

There was a bit of a price rally off its low, but the real action to the upside didn’t start until about 10 minutes before the Comex open.  An intermediate high came at 10 a.m. EST, the London p.m. gold fix,  Then it sold off a bit until half past lunchtime in New York.  The rally that followed petered out about 3 p.m. in electronic trading.  However, just before 4:30 p.m. EST, silver blasted skyward, but got capped shortly before the 5:15 p.m. close of electronic trading.

Silver’s low and high price ticks in the December contract were $19.57 and $20.30 respectively.

Silver finished the Monday session at $20.205 spot, up 37.5 cents from Friday’s close.  Gross volume was very heavy,  but net volume was only 30,000 contracts.

The low ticks for platinum and palladium came just before and just after the London open.  Platinum rallied until 11 a.m. in London, and palladium until 3 p.m. in London, which was the London p.m. gold fix.  Both didn’t do much after that.  Here are the charts.

The dollar index closed late Friday afternoon in New York at 80.70, but the index was in rally mode right from the open on Sunday night, with the high tick of 81.02 coming shortly after 11 a.m. in New York on Monday.  From there it chopped lower into the close, finishing the trading day at 80.84, which was up 14 basis points from Friday.

The gold stocks gapped down at the open, and with the exception of the odd blip here and there, got sold off in grand fashion until their low, which came shortly before 1 p.m. EST in New York.  But once the gold price began to show signs of life in the electronic market, the shares quickly followed, but couldn’t close in positive territory.  The HUI finished down 0.39%.

The chart pattern for silver equities was somewhat similar, but the shares managed to finish just above unchanged, as Nick Laird’s Intraday Silver Sentiment Index closed up 0.48%.

The CME’s Daily Delivery Report showed that 10 gold and zero silver contracts were posted for delivery within the Comex-approved depositories on Wednesday.

Another day, and another withdrawal from GLD.  This time it was 106,127 troy ounces.  And as of 9:58 p.m. EST yesterday evening, there were no reported changes in SLV.  But when I checked their website at 4:10 a.m. EST this morning, it showed that an authorized participant had withdrawn 963,042 troy ounces.

The U.S. Mint had a small sales report yesterday.  They sold 331,000 silver eagles, and that was all.

There wasn’t much movement in Comex gold stocks on Friday, as only 5,518 troy ounces were reported shipped in, and a measly 160 troy ounces were shipped out.  The link to that activity is here.

As is almost always the case, it was another big day in silver at these same depositories.  597,425 troy ounces were reported received, and 156,440 troy ounces were shipped out the door.  Most of the action was at the CNT Depository.  The link to that activity is here.

I have a decent number of stories today, and I hope you find some that interest you.

I attribute the rapid turnover in the Comex silver warehouses to an underlying tightness in the wholesale supply of physical silver since April 2011. Obviously, there has been no shortage yet; but the turnover indicates a slow-boil beneath the surface. Despite rotten price action, the world is not swimming in physical silver; it is swimming in paper short sales. Therefore, it wouldn’t take much of an increased demand to crank the heat up to full-boil. Since it is hard to imagine investor sentiment getting much worse, it is easier to imagine it getting better. On the next up cycle in price, investor demand for silver will set-off the shortage, in my opinion.  – Silver analyst Ted Butler: 23 November 2013

I guess I shouldn’t have been surprised by the sudden appearance of the high-frequency traders in afternoon Hong Kong trading on their Monday.  This would be a natural for them, and as you’ve already figured out, we hit new lows for this move down in all four precious metals at that time.  Here are the charts.

Based on their rather surprisingly rallies off those lows, I’ll be amazed if JPMorgan et al can spin the prices to new lows at this point in the roll-over cycle out of December, because that’s what they’d have to do to get more technical fund/small trader long position selling/short position buying.

The last day for the big traders to be out of the December futures contracts is either today or tomorrow, and it would require a market intervention to the downside so obvious that even the precious metal miners might actually take notice.

The stories about the shortages in both platinum and palladium in the Critical Reads section are absolutely true.  But as I said in my comments under each one, supply/demand fundamentals mean zip when JPMorgan et al are sitting on their prices in the Comex futures market.  They hold record short positions in both metals, and as I said in my column on November 13;

“But the goings on inside the palladium market will make your eyes water.”

“3 or less” U.S. banks are short 12,260 Comex palladium contracts.  Note that I didn’t say “net” short.  For the second month in a row these “3 or less” bullion banks have held zero long positions against their massive short positions.  The lack of Comex long positions by the U.S. bullion banks in the BPR reports over the months and years is obvious.”

“These “3 or less” U.S. bullion banks are short 30.5% of the entire Comex futures market in palladium.  You have to wonder how the %&*# they get away with that, and why the miners aren’t screaming bloody murder.”

“Except for the willfully blind, it is obvious that three or four U.S banks have total and absolute control of all four precious metals in the Comex futures market, where all prices are set.  And in gold and silver, Canada’s Scotiabank adds an “international” flavour, especially in silver.”

As Winston Churchill said: “Men stumble over the truth from time to time, but most pick themselves up and hurry off as if nothing happened.”  That certainly applies to a large swath of people in the precious metals venue who should, and do, know better.  This is especially true when the government’s own hard data in front of them now, proves the point.

How did it come to this?

Here are the Bank Participation Report charts for both palladium and platinum as of the close of trading on Tuesday, November 5.

If you want to re-read what I had to say about platinum, gold and silver, and view their associated BPR charts, the link to my November 13 commentary is here.  It’s in the top section of the column.

While I’m at it, here’s Nick Laird’s now-famous “Days of World Production to Cover Comex Short Positions” chart for positions held at the close of trading on Tuesday, November 19th, and is based on data from Friday’s COT Report.  This shows the short positions of the four and eight largest traders in each physical commodity traded on the Comex.  This includes all traders, not just the banks.  But it’s a safe bet that JPMorgan Chase, HSBC USA, Citigroup and Canada’s Bank of Nova Scotia are the dominant players in all four precious metals, plus copper.

Not much happened in Far East trading on their Tuesday.  The spike up in gold at the 6 p.m. New York open on Monday night got dealt with in the usual manner, and it’s been very quiet across the board ever since, and that includes all four precious metals.

London has been open about an hour as I write this, and not much is happening there, either.  Volumes, both gross and net, are unbelievably light, even for this time time of day.  The dollar is down about 12 basis points at the moment.

As we wait for December to go off the board, all we can do is sit back and see what JPMorgan et al have in store for us once we get past first day notice.  I haven’t a clue as to what Tuesday will bring in New York today, and I really don’t care at this point, as it’s what happens next that really matters.

And as I hit the send button on today’s column at 5:15 a.m. EST, very little has changed in any of the four precious metals.  True, volumes are higher, but most of that is roll-overs out of December, and net volumes are fumes and vapours.  And, not that it matters, the dollar index is still down the same amount as it was 90 minutes ago.

That’s all I have for today, which is more than enough, and I’ll see you here tomorrow.